department of resources, energy and tourism apec energy trade and investment study

Department of Resources,Energy and TourismAPEC Energy Trade and Investment Study

Part 1 – overview and key conclusions

APEC Energy Trade and Investment StudyPricewaterhouseCoopers

Agenda

• Introduction• APEC’s challenges• Scope and methodology• Barriers to trade and investment• Role of international organisations• Next steps • Conclusion


Introduction and Overview

• Discuss the implications of the APEC Energy Trade and Investment Study and to reach a shared understanding of realistic actions that member economies can undertake to improve energy security and sustainable development

• Move from dialogue to realistic actions- Working with APEC- Working within individual economies - Working in concert other international organisations

• Development of Draft APEC Energy Trade and Investment preamble and Action Plan


APEC’s continuing prosperity is dependent on developing new sources of secure and environmentally sustainable energy

• APEC is host to the world’s top four energy consumers and three of the top four energy exporters

• By 2030 APEC will:- Move from a net exporter to a net importer of LNG, coal

and oil- Require $US6 trillion of new energy investment

• At a time of uncertainty surrounding:- Climate Change- Declining supplies- Global financial uncertainty


APEC is a net importer of oil, but has substantial reserves of gas, coal and uranium – the imbalances will grow as demand expands and supplies fall. By 2030 indigenous production will equal only 75% of demand

793,768

73,368

300

-541

714,368

-35,293

-10,030

-107,203

-200,000 - 200,000 400,000 600,000 800,000 1,000,000

Coal

Coal Products

Crude Oil, NGL & Condensate

Petroleum Products

Gas

Hydro, nuclear, geothermal, heat & others

Electricity

Total net imports

Net imports of primary energy supply by energy type for 2005 (ktoe)

Source: APEC Energy Trade and Investment Study


Energy security remains a critical issue for APEC economies

• Energy security has moved beyond simple availability of oil to encompass all energy sources and a broad range of objectives:

- Security of supply - Economic security – affordable energy- Socio-economic security – improved access to rural and

poor areas- Environmental security – reduction in pollution and

greenhouse emissions

“As a diverse region comprising economies with vastly differing reserves, including major net importers and net exporters, it is likely that energy security can be achieved more easily in cooperation than by individual economies in isolation” APEC Energy Trade and Investment Study, p11


A key component of improving energy security is by identifying, prioritising and removing barriers to energy trade and investment

• Objectives, Methodology and Scope- Its aim is to identify and prioritise border and behind-the-

border barriers to energy trade and investment across APEC.

- A mixture of literature reviews, stakeholder consultation and a prioritisation of the barriers

- Barriers were identified at a thematic level i.e. non-energy or economy specific, large-medium sized infrastructure and focussed on commercial energy technologies


A prioritisation may be able to usefully inform decisions by APEC leaders in terms of focused action and dedication of resources to promote energy investment and trade

Priority category BarriersHigh Policy uncertainty

Lack of competition and anti-competitive behaviour

Medium / high Weak legal systemsInadequate infrastructureLimits on foreign ownership of energy businessesScreening or approval requirements for foreign investment in energy businesses

Medium / low Inefficient or excessive taxesEnergy import and export policiesOperational restrictions

Low Political issues / instabilityPoorly functioning financial marketsCorruption


Role of international organisations differ in their geographic coverage of APEC economies, their degree of focus on energy versus other sectors, and their key roles and activities

The roles and key activities of key international organisations working across APEC economies generally comprise:

- Facilitating and encouraging communication between Governments- Sharing ideas and best practice on regulation- Sharing ideas and best practice on technical matters- Conducting research and analysis- Highlighting barriers and problems- Facilitating private sector partnership- Financing or leveraging finance of others- Hold member economies accountable for action

The role of APEC going forward is to work with other organisations on developing focussed & concrete actions to promote trade and investment


How study can inform APEC economies

Phase 1: Identification and Prioritisation of Barriers

Phase 2: Development of Draft Action Plan

Phase 3: Post Roundtable Information Sharing

“The uneven resource distribution [within APEC] means that international cooperation is required to sustain primary energy supply through trade … but also creates a unique opportunity to work together to support the achievement of energy objectives for all economies.” APEC Energy Trade and Investment Study,


Areas for potential follow up

• Identification of barriers for commercialisation of new technologies, renewable energy and distributed energy

• Studying the barriers to energy trade and investment at an energy type-specific level in order to facilitate appropriately targeted action to address them.

• Economies may redefine prioritisation of barriers in the context of their own circumstances and level of economic development to ensure it is appropriate.

• Indentify areas where benefits are dependent on international collaboration e.g. technical standards, climate change or cross border infrastructure


Conclusions – Potential Role for APEC

• The Study has highlighted the barriers to energy trade and investment which stand in the way of improving energy security in the region.

• Going forward APEC may seek to:- Continue to support the Asia Pacific region in the role and activities

of other international organisations- Address areas which it considers are not being accorded priority by

these organisations- Assist member economies in developing “best practice” regulation

and improving collaboration in addressing cross-border barriers- Developing focused & concrete actions to promote trade and

investment

Comments

Part 2 – priority barriers and prioritisation analysis


Prioritisation – multicriteria analysis

• Useful where factors cannot be satisfactorily quantified and / or valued but are important to the assessment.

• Involves the assessment of key elements against a set of criteria that include both quantifiable and non-quantifiable factors

• Allows barriers to be assessed fully on the basis of all driving factors



•Stakeholder conversations revealed:- Differences by energy type- Difference by prevalence across economies- Difference by strength of barrier to market entry

•Other factors influencing priority- Effect on investment productivity- Economic impact of removal



• Scoring of high / med / low based on understanding through literature review and stakeholder consultation

• Scenario analysis with different criteria weighting to ‘test outcomes’

• Barrier priority categories emerged



Priority category BarriersHigh Policy uncertainty

Lack of competition and anti-competitive behaviour

Medium / high Weak legal systemsInadequate infrastructureLimits on foreign ownership of energy businessesScreening or approval requirements for foreign investment in energy businesses

Medium / low Inefficient or excessive taxesEnergy import and export policiesOperational restrictions

Low Political issues / instabilityPoorly functioning financial marketsCorruption


High priority barriers – policy uncertainty

• Relates to unpredictable regulations or unclear policy direction

• Increases risk for investors and therefore deters investment

• Climate change policy uncertainty raised as a particular issue for investment


High priority barriers – lack of competition and anti-competitive behaviour

• Where the regulatory and institutional environment does not enable overseas investors to access the same opportunities as State owned enterprises

• Where incumbent firms attempt to limit competition in the market

• Includes:- discriminatory treatment between overseas and domestic

investors- lack of price deregulation- subsidisation of domestic energy sources


High /medium priority barriers – weak legal systems

• Where there are:- regulatory gaps - poor protection of property rights- unclear regulations and contract enforcement difficulties

• Highlighted as ‘economy specific’

• Increases investor risk


High /medium priority barriers – inadequate infrastructure

• Increase the time and cost of transporting energy from sources of supply to areas of demand

• Discourages foreign investment in generation capacity and international trade

• Where clean energy technologies have particular infrastructure needs, lack of such infrastructure can inhibit the growth

• Some parts of the market should remain regulated – but returns should reflect the WACC

• Highlighted by stakeholders as significant barrier across net importing / exporting economies, particularly within developing economies, and important for most energy types.


High /medium priority barriers – limits on foreign ownership of energy businesses

• Explicit rules for accepting or rejecting investment proposals

• Some reforms but remains common across APEC economies for different forms of energy

• Imposed through foreign investment law or energy regulation

• Restrictions should balance protection domestic interest with:- benefit from liberalised energy trade and investment

across the region- benefit from access to energy (e.g. in supporting the

activities of productive industries)


High /medium priority barriers – screening or approval requirements for foreign investment in energy businesses

• Most economies have foreign investment review process

• Barrier created where:- foreign investment screening and approval process lacks

transparency or predictability- restrictions imposed are disproportionate to domestic

interest or security requirements- screening and approval process is considered complex

and lengthy

Thankyou

department of resources, energy and tourism apec energy trade and investment study

Documents

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